• Rodney Lowe


In the mid-1970s the welfare state in Britain was, or at least was widely considered to be, in crisis. With unemployment standing at just under one million, the Labour government in its budget of April 1975 chose not to reflate the economy. It thus became the first postwar government, other than during a temporary balance of payments or sterling crisis, to abandon the goal of ‘full’ employment. The reasons for this decision were made explicit in the following year, after a serious sterling crisis had obliged the government to seek a loan from the International Monetary Fund. As Prime Minister James Callaghan told his party conference in September 1976:

We used to think that you could just spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour, that option no longer exists, and that in so far as it ever did exist, it worked by injecting inflation into the economy. And each time that happened the average level of unemployment has risen. Higher inflation was followed by higher unemployment. That is the history of the last twenty years.1


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Notes and References

  1. 1.
    Labour Party, Report of the 75th Annual Conference (1976) p. 188.Google Scholar
  2. 4.
    B. Donoughue, Prime Minister (1987) p. 187.Google Scholar
  3. 7.
    P. Kavanagh, Thatcherism and British Politics (1990) p. 311.Google Scholar

Copyright information

© Rodney Lowe 1999

Authors and Affiliations

  • Rodney Lowe
    • 1
  1. 1.University of BristolUK

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